Macron's Math for France's Future
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Macron's Math for France's Future
And what that means for retirement everywhere.
On Saturday, French President Emmanuel Macron signed the controversial law that would raise the country’s retirement age from 62 to 64 after months of intense protests. The change aims to fill an increasing pension deficit as the aging population grows. Trade unions, workers, and the majority of French people view this as fundamentally unfair, and feel that Macron has overstepped as a leader by ignoring the immense opposition to this decision.
Elizabeth Carter, an assistant professor of political science at the University of New Hampshire, summarized these sentiments in a statement to U.S. News & World Report:
The French perspective is, “this is part of our social pact. This is part of our social contract. We work hard. This is what the state has agreed to give us and this is why we've worked hard.” And they see it as rescinding essential benefits that they had been promised. It’s more about identity.
But as understandable as these feelings are, there is some relatively straightforward yet tough-to-swallow math involved with this issue that there is no easy way around. It’s no revelation that people living longer is the primary source of this predicament, but seeing the numbers laid out is important to highlight exactly what France — and ultimately anyplace else — will need to grapple with.
Looking at the distribution of the working age population and the retirement age population in France over time, we can immediately see the problem: the share of older people is increasing faster than the share of workers. As I mentioned before, this isn’t esoteric knowledge but rather the express statistics that underpin Macron’s dilemma. But things get a bit more interesting when you also account for the retirement age changes that France has made now and over the past decades.
This chart looks at the retirement age to working age population ratio in the years the retirement age shifted, starting with the change in 1982 when it was lowered from 65 to 60. Even as the retirement age has increased, this ratio is still getting larger.
If we look at this as a matter of population proportions, Macron didn’t raise the retirement age in relative terms; he didn’t even keep it the same. He made it slightly less low than it was becoming. The ratio of retirees to workers has increased so much that raising the age from 62 to 64 still means that the working population has an increased burden in supporting pensioners. This was also true when Sarkozy raised the age in 2010 (which was met with similar protests at the time). In short: the retirement age has been effectively lowering itself every year due to longer lifespans, even when accounting for these age increases.
There are only three options to deal with this: steadily increase taxes to pay for the pensioner population as it grows, regularly adjust the government budget by moving funds from other areas to this growing population, or raise the retirement age to maintain the retirement to working age ratio.
I don’t consider the first two options sustainable, nor do I think they would be particularly easier to accept. You can’t simply raise taxes or modify spending once and call it a day. You would have to do one or both of these regularly and indefinitely — eating away at people’s incomes and the government budget. Are these alternatives preferable?
I understand why telling people that they’ll need to work longer before they receive their earned time of leisure will be unwelcome. I also understand that not all jobs are the same. Certain jobs that are especially physically taxing necessitate either an earlier retirement or a transition into different work. Maybe this involves rethinking work and retirement entirely. For many people, continuing their careers into old age but working fewer hours a week and taking longer and more frequent vacations throughout their lives could be a better alternative to the status quo.
This matter doesn’t end here for France or anywhere else. I think Macron made the tough and unpopular but ultimately correct decision to raise the age, but that still passes this issue to a future French leader. There’s no reason to expect longevity to stagnate or decrease and sooner or later, yet another difficult choice will have to be made. And it’s likely this challenge will come to someplace else before France faces it again.